Daimler to cut dividend

February 4, 2002 Posted: 1200 GMT

LONDON (CNN) -- DaimlerChrysler is expected to cut its first dividend since the 1998 merger of Damiler-Benz and Chrysler after a sharp drop in profit.

The world's third-biggest carmaker will cut its dividend to 1.50 per share from 2.35, the Financial Times reported on Monday, saying it would save close to 1 billion from the measure to be announced on Wednesday.

Daimler's loss-making U.S. business, Chrysler, has been a major headache for the German automaker. Chrysler has been dragged into a price war with Ford (F: down $0.40 to $14.90, Research, Estimates)  and General Motors (GM: down $0.03 to $51.11, Research, Estimates) as an economic slowdown makes consumer reluctant to splash out on big ticket items.

European carmakers deliver their earnings reports over the next few weeks, with Credit Suisse First Boston forecasting earnings for the region's biggest will tumble 27 percent in 2001. And there is little relief for 2002 as competition heats up.

DaimlerChryler is expected to post a fourth-quarter operating profit of about 500 million ($431 million), according to a Reuters poll of analysts, compared with a loss of  405 million a year ago.

For the year, the company has signalled adjusted operating profit would come in at the bottom end of a target range of 1.2 billion to 1.6 billion, compared with 5.2 billion in 2000.

The Financial Times put the figure at 1.3 billion, following a strong performance at Mercedes-Benz and cost-cutting at Chrysler, where DaimlerChrysler has slashed 26,000 jobs and closed six plants in 2000.

Chrysler, which is in the middle of an overhaul to return back to profit, is expected to post losses of about 2.2 billion to 2.3 billion for 2001 because of a relentless price competition. It was forced to raise cash rebates last week due to similar deals from U.S. rivals.

DaimlerChrysler may cut its 2002 adjusted operating profit goal, set almost a year ago at 5.5 billion to 6.5 billion, as doubts mount that Chrysler can break even this year and as its trucks unit faces tough market conditions.

Many analysts expect a new target of 3 billion to 4 billion, according to Reuters.

France's PSA Peugeot-Citroen plans to report earnings on February 13, while Renault will issue its results a day earlier. BMW and Volkswagen are scheduled to issue earnings statement early next month.